tv [untitled] February 16, 2012 3:00pm-3:30pm EST
reforms. >> i very much appreciate that. again, i think that we'll try to keep this a little more civil, at least every other speaker, and give you the opportunity to really lay out what is a clear vision for this country and contrast unfortunately to the other side, and i appreciate what you said about willingness of the administration. i know there is another administration that reached out so often and in great detail to the other side of the aisle and not gotten the cooperation back. i will end on a positive note having just signed the conference committee approach. we got a conference committee working. it did its work. it reached a compromise. i think it protects 160 million americans who need that 2% payroll deduction and unemployment and of course on the medicare physician side, so i look forward to that. >> my compliments for that. like i had, don't stop there. trying to figure out a way to go further. >> mr. eagan.
>> okay. i think the only place i am agreeing with you is overall captions and headlines. i agree with that part and everything below it i have trouble with. >> some of your head lines we agree with, too. >> one of them is that you talked about maintaining national security and it seemed like another one was create, grow jobs and the economy. those things i don't think you get any kick from any of us. first question is specific and that is does this budget set out in a specific plan something to prevent the is he sequestra ti on or cut in national defense? is there something you are submitting so we don't take that 10% cut? >> if you count the savings, 1 trillion in the caps on discretionary spending we agreed on in august and proposed an additional 3 tril wron in savings roughly split 50/50
between spending cuts and revenues, the spending cuts alone are enough to meet the test you have to meet in the sequester and our spending reduction proposals primarily are the 350 or so billion dollars we save from medicare and medicaid and the 250 or more billion dollars we save from other mandatories but the budget contains a range of other savings and we achieve that and believe that mix of policies both spending revenue side and it goes well beyond what you need to replace the sequester and better than letting the sequester hit. >> if that happens does the sequester automatically repeal? >> i can't remember exactly the way the legislation is written. if congress were to embrace reforms that achieve more than the savings required by the sequester, then the sequester do not go into effect. >> do those include tax increases? >> that's the judgment you have to make. we think they'll have to ultimately. we have a magnitude of savings
proposals that would exceed the required amount to suspend the sequester. >> first thing is i just came from the armed services committee and the top military leadership all sags see questions trags is a teelgts and complete dast isser and the second thing is jobs on the economy. one of the items is you're going to repeal the percentage depletion for hard mineral fossil fuels, i.e. coal. the administration has already been pretty tough on the coal companies in terms of permits. there is a lot of foot drags so they can't get their permits, increasing the size and expanding the streams act apparently makes it very hard for longwall and now this thing here will increase the taxes on coal companies. is that correct? >> you're right that we do propose and have for some time dialing back, eliminating, reducing the very generous substantial subsidies we provide
for a number of parts of the energy sector, and we think that's necessary. we think it is good energy policy, good economic policy, and i would remind you that i think as you know -- >> let me get real practical on you, though. if you get rid of the depletion allowance, it means the coal company taxes will go up, right? >> if you remove a tax subsidy for a specific industry, yes, the taxes go up. >> their taxes currently are returning about 22% whachlt will happen if you get rid of the depletion allowance for coal? >> i would be happy to respond to you in writing but it would be worth noting the average tax rate paid by american businesses today is in the high 20s, so the reason why they get to pay only 22 or 18, whatever it is for the energy industry, is because other businesses across the economy are paying more. that's not efficient. it is not fair. it is better to have a flatter, more even system. >> the depletion allowance if you remove it basically will shut down the coal industry.
i know the president, or at least i have heard it reported he is pretty favorable to that idea, but the fact of the matter, there is an awful lot of mines closing now all over the place and so if you continue the foot dragging and the permits, you increase the ground water situation so you can't mine underneath an intermittent stream or something that has no water in it a good part of the year and you get rid of this depletion allowance which makes a certain amount of sense because when you take the coal out, once the coal is gone, there isn't anything there and they have the same thing for like sod farms. you take enough sod off the top, there isn't any more top soil. you will basically shut the coil industry down. that doesn't seem like jobs and the economy. to me it sounds like war on the private sector. >> we don't believe our proposals have that risk and happy to talk to you in more detail about what makes sense in this context. >> thank you. mr. blummenhour.
>> thank you, mr. chairman. mr. secretary, i couldn't agree with you more that progress does not have to wait for another election or a new administration. it is interesting to watch what has happened a year ago there were some threatening to shut down the government over big bird and planned parent hood and the summer you mentioned there were some who were seriously arguing that we not honor paying the debts that we have already incurred. >> it wasn't just a few. it wasn't just some. >> yes. later, in fact, this year we had people go home for the christmas holiday over the debate about the payroll tax, but actually the people sometimes are hurt, and we watched folks come back from the holiday and approve what had been essentially
rejected, and we're going off to sign off on a conference committee that is extending it for the rest of the year unpaid for which you couldn't have imagined if you just listened to the rhetoric including some around this table earlier in the year. i was struck by what our chairman said about 1986 and tax reform. i thought that was a fascinating period. i would like you to comment on a couple of differences. i look at 1986 as something that made a difference. i don't have enough time to put the charts up that talk about much higher performance of this economy when the tax rates were much higher. there are things like investing in education, in infrastructure, that matter deeply. 1986 featured -- it did not have 235 members of the house of representatives who signed a pledge that they're not going to raise anybody's taxes on
anything becauses as you well know there were lots of changes in that reform that ended up raising taxes on a number of people despite cries that it was going to shut them down. it actually didn't. ronald reagan signed off on something that correlated taxation on individual work and investment. we had people in both parties who were working together, a president who repeatedly raised taxes. ronald reagan raised a gas tax in 1982 a nickel a gallon back when that was real money. seems to me one of the big differences in '86 versus now is we have two parties that were willing to make adjustments, raise taxes where necessary. they had some confidence going back and forth working together. there were no signed pledges
that things were off the table. i wonder if you could just elaborate from your vantage point because you really didn't have a chance to elaborate on some of the give and take where it appeared from those of us on the outside that the president and the speaker were making progress before somebody's chain was yanked but if you want to talk about '86 versus today or the process, i would be -- i would welcome your thoughts. >> i do agree that it is going to be harder than '86 base in part because of the politics in the republican party and how that changed. i think that's interesting about '86 is ronald reagan designed and re formed a tax plan that resulted in a substantial increase in taxes on businesses in order to pay for a substantial tax cut on individuals and subsequently decidedes he had to reverse and he reversed much to his credit because he was worried about the long-term fiscal problems, he reversed a substantial part of that individual tax cut in the
coming years because he realized it was irresponsible and unsustainable. i want to try and take the positive side of this debate because -- >> please. >> the request he is -- the question is whether are we coming closer together or moving farther apart. i don't know. if you look back the past year despite all the noise and despite how devisive it has been, we did some very good important foundation laying on entitlement reform and tax reform. you saw the appropriation process work at the end of last year. took us longer than we thought but you just got a bipartisan agreement to extend the payroll tax cut and extend unemployment insurance. we think there is a lot of room still on things good for growth in jobs like infrastructure or on helping refinance mortgage, for example, or investment incentives where they think there traditionally is a lot of bipartisan support and we should be able to move forward on those things, so our hope is we can find practical things we can agree on even while we're trying
to narrow our differences on the big things. >> thanks, mr. secretary. >> dr. price. >> thank you, mr. chairman. secretary, welcome. i think that the american people by and large want us to get the job done. there is a lot of misinformation and disinformation that comes out of washington. we heard some of it in this room this afternoon. the fact of the matter on the payroll issue is there were some folks staying in town trying to solve this and some folks that fled. the folks that fled were our colleague democratic colleagues in the senate. uncertainty in the market is destructive to job creation. i assume you agree. >> well, i guess i would say right now the biggest source of uncertainty is keeping growth modest is concern about the weakness in demand. >> uncertainty for employers, what their tax rate is going to be, what the consequences of this policy or that policy are going to be.
when there isn't certainty when we talk to small and large job creators they say we have to wait. is that not the case? >> it can be. i don't think much evidence today about the long-term questions we're facing is having a material damaging effect on growth now. what's hurting growth now is the fact that people still have too much debt and still working through the housing problems and we faced a terrible triple storm, triple threat of europe, oil in japan last year apart from the debt limit damage. >> let me take you up on the uncertainty. the uncertainty on the other side was a two-month fix to these things and we had passed through the house one year holiday tax reduction, one year of unemployment benefits extension and a two-year plug for the physician doc fix, but i want to talk about taxes on small businesses. yesterday i was intrigued because in one of the committees, i can't remember which one, in which you testified you said taxes on small businesses would indeed go up. >> 2 or 3% of american small business.
>> and i appreciate that honesty, and if we look at the 2 to 3% of those that file those business tax returns, that's actually 32% of the business owners and employs 33 million people. those 2 to 3% employ 33 million people in this country in small business. >> i don't know if those numbers are right. as we talked about this before but let me mention two things in that context. that definition of small businesses includes most americans won't think of as small businesses includes lawyers and law firms and partners and law firms and partners in hedge funds, private equity firms. >> i promise you half of those small businesses you just referred to have income after expenses of more than a million dollars. those that think they are small businesses are the secretary working for that attorney orifice, the clerk in the small store, the small outlet. they certainly know they're working for a small business, and when you raise taxes on
small businesses, what happens is that you get less of what the small business does. >> how are they doing? ask them how are they doing in the second half of the 90s? >> we're not comparing it to the second half of the 90s. we're comparing to where we are right now and where we could be. that's the difference between this budget and the budget that we will propose. that is that we have a pro-growth budget that keeps tax rates the same or reduces tax rates because increasing taxes to chase ever-increasing spending which is exactly what your budget does it insanity. the american people know it which is why they look to washington and say what the heck is going on? >> congressman, are you saying the budget you propose will have no revenue increases in it? >> we do increase revenue and do it in a neutral way so we close loopholes, broaden the base. >> neutral or raise revenue. >> raise revenue over time so
you can accommodate the changes in the demographics in society. >> how do you raise revenue? >> i am happy to be on the panel at the treasury department when you invite me down. i would be happy to do that. the fact of the matter is -- >> the reason i say this is -- >> mr. secretary, the fact of the matter is in this budget that you have, you increase taxes $1.9 trillion. if you're increasing taxes to balance a budget, that's one thing. if you are increasing taxes to expand ever-increasing spending, that's something absolutely different. that's what's so frustrating to the american people. >> and good question but that's not what we're doing. you are right. as i said, we are proposing to raise taxes by slightly more than 1 percentage gdp. >> $1.9 trillion. >> over ten years. >> $1.9 trillion. >> we're doing that alongside roughly 2 to 1 the ratio of spending cuts. if you do not want to -- >> the spending cuts that you
say you have are in fact already in law, already in law. you're raising taxes $1 for every 83 cents. >> that is not true. the good thing about -- >> i will be happy to talk to you about it. >> the point is -- >> we're running a tight clock. stop, please. >> no. i have to respond to the question. >> no. >> we're through. >> you're going to miss your schedule if we keep doing this. we're doing this -- do you want to be out of here by 4:30, right? >> thank you, mr. chairman. mr. secretary, thank you for being here. i want to congratulate you on what i think is the clearest articulation of our short-term economic needs and our long-term challenges that i have yet heard and i think anybody watching your appearance here and listening to that would understand that we need different approaches over the next few years than we do for the next 40, and i appreciate that very much. secondly, i would like to say or ask you we have seen all of these charts with long big lines
going out 40, 50, 60, 70 years. with changes in technology, medical research, demographics, culture, world situations, so forth, how reasonably reliable do you think those projections are 40 years from now or 50 years from now? >> not at all. >> about as much as betting on the kentucky derby horse? >> just to give you an example, when the clinton administration left office in 2000, cbo projected surpluses over the next ten years of roughly $5 trillion. in that eight-year period we swung from $5 trillion projected surpluses to projected deficits in the range of about a trillion. it shows you what can happen in a short period of time when people make bad policy choices or face financial crisis. ten years is hard to predict. 20 years is impossible. 40 years is ridiculous. >> thank you for that.
i do want to make a comment on mr. price's question to you about small business owners. they used -- republicans use this argument a lot and say that this 2% of small business owners represents 30% of small business income. does that not essentially under mine their point because this very small percentage of small business owners is making a lion's share of all the income from small business owners and therefore it is kind of hard to argue that 4.6% more taxes will be annum pedestrian meant. >> they may be small by somebody's definition but they're rather rich. i think the more important thing to say is if you're not going to raise revenues by allowing the effective tax rates to rise modestly for the top 2%, who are you going to ask to pay more taxes or whose benefits are you going to cut? the reason why this is so important for the outlook for
the business community is if you try and find that 1 percent gdp in revenues, in this near term period, through cuts in infrastructure, defense spending, medicare benefits, low income programs, infrastructure, then you will do more damage for the demand to the demand for their products. they will have less products they can sell. they won't be better off for that reason. we think this is a better package for growth in the alternative if you are going to commit to lower the deficits. >> i can't let you get away since you're talking about products. i have to mention the proposal of the administration again to do away with the lifo accounting method which would have very dramatic effects on the bourbon distilg industry in my state and something that's a growing export. yesterday i asked whether or not in constructing the proposal to end lifo that there is a consideration of the broader economic impact of ending that and of course i am particularly
interested on the disstilling industry and others. has there been an analysis of broader economic impact? >> we have looked very carefully as we always do on the industries affected and in our judgment the impact is modest and manageable but of course no one likes to see their taxes go up, and our basic problem is because we have limited resources is who are we going to ask to pay for those special taxes? they do go to a broad range of industries. i understand they have a long tradition. i understand the merits of them but the fundamental problem is we face unsustainable deficits and we have to find a way to make the system more fair so that businesses and similar circumstances are paying roughly the same effective tax rate. >> is there an analysis because i know for instance one corporation based in my district which does $3.4 billion worth of business pays something like
$800 million on export taxes, a heavily tax industry. is there something we can look ato analyze? i know part is about oil and gas and that's the lion's share of it but oil and gas doesn't taste at all like bourbon and be happy to demonstrate that to you. >> i think the chairman should serve bourbon at our hearings to show. >> if you had that analysis, i would love it. >> happy to give as much information as we can to you in that context. >> thank you, mr. secretary. >> mr. chaf fis. >> are you calling upon the senate to pass your budget? >> i thought you might ask this question because i heard do you this the last few days. i am not a budget process expert. you are the budget committee. i will offer a few things in response to that. the senate does not need a budget resolution in order to pass appropriations bills, pass tax cuts, tax reforms, pass
entitlement reforms, pass mandatory savings. as you know, pass the american jobs act, pass the payroll tax cut. that's a budget process question. what we want to do is get this -- we like the senate and the house together to find more things they can do together that would improve the growth in jobs. >> i would love to hold hands with harry reid. we have done our job in the house in the past and passed budget bills or the budget here. it is a simple question. are you calling upon the united states senate to pass the president's budget? >> we're absolutely calling on the united states senate to embrace as the house as well to embrace the fiscal reforms we propose in the budget, absolutely. >> are you calling upon the senate to pass the president's budget? if so, why is it reasonable for them to do that? >> can i say one thing? it is not a test of governing and legislating is not for you to end is the senate things that
you know will not have bipartisan support. that's not a test of legislating, i don't think. >> i am asking about a democratic president, president obama, and this administration and you as the secretary of the treasury, are you calling upon the senate which is controlled by the democrats to vote on and pass your budget? >> as i said, absolutely we would like the senate and the house to act on the senate reforms that the president has in the budget. that's what i abudget is for. i was pointing out that you said we have done your job. i don't think that's the test of legislating in a divided country with divided government. >> so is it fair tore me to say that you're not calling upon the united states senate to pass this budget? >> no. it would be fair to say what i just said which is that, yes, we would like the senate and the how us to pass sensible fiscal reform that would help the economy. we would like that to happen. >> i find it stunning that the senate has yet to pass a budget more than 1,000 days. it is terribly frustrating on this. >> you say that to me if you
want. if you're using your time poorly because you have been saying it for five days. >> i don't want you to tell me how to do my job because we're doing our job here. we're doing our job here. we are passing budgets and we are passing legislation that sits and stalls in the united states senate. it is frustrating. you can smile and laugh about it all you want. >> i can help you with other questions. i can't help you with that one because that's about the senate. >> i think that's part of the challenge. the white house is not calling upon the senate to get involved in this game and pass a budget. that's the way we come to a reconciliation. that's how we work these things out is when we pass something and they pass something and we come to a conference and work on it. if they refuse to do their job, if they refuse to actually -- and the white house is just going to sit here giddy with the smirk and laugh about it like we can't do anything about it, then we make no progress. that's part of the frustration. let me ask you about the january budget and economic outlook that was put out about i cbo that estimated that the stimulus didn't cost $787 billion but
actually cost $821 billion. would you agree or disagree with that analysis? >> i haven't seen that. i would be happy to take a look at it and get back to you. >> thank you. i would sincerely appreciate it. on page 2 of your testimony in the top paragraph you have this one particular sentence in here that i would take issue in. it is the end of the first paragraph, top page, page 2. these savings are sufficient to stabilize our debt as a share of the economy by 2015 and begin placing our debt on a downward path. what's troubling here is when i look at the total debt held by the if early government, when president obama took office it was roughly 9 trillion. now it is going to be projected under your numbers and budget to be $26 trillion. the president has never put forward a budget that actually balances to pay down the debt. is that correct? >> we propose reforms that as i said would reduce the budget
deficit to a level that is sustainable defined as a level that stabilizes the debt burden at an acceptable share of the economy and starts to bring it down. >> what percentage would that be? what percentage of debt is acceptable? >> the deficit level you need to stabilize the debt has to be slightly below 3% of gdp. if we do it in this timeframe that would stabilize the debt burden as a share of the economy and measure this as net debt held by the public net of financial assets in the 70s as a percent of gdp. that is a manageable burden for us but as we all said and your charts show, that's a start. if you only do that, then in the succeeding decades those costs start to grow again. >> i would like to address the $25 billion agreement amongst the 49 states attorneys general and the five largest mortgage lenders.
in new jersey homeowners will receive $762 million in direct relief. with the majority going to refinancing. however, the overall agreement 17 billion or principle reduction is nothing compared to the 700 million total in negative equity for homeowners in this country. that to me is a big deal. in august of 2010 the new york fed in this document found that a principle writedown of a mortgage with 18% negative equity would cut the probability of default 40%. that's a big deal, within one year of modification. considering nearly half of all our standing mortgages are owned by freddie mac and fannie mae,
correct, my friend from new jersey, seems we have a simple solution. tell me where it isn't so simple. secretary donovan recently commented on fannie and freddie. we need to break the log jam of principle reductions and as you well know treasury has offered triple incentives to banks and mortgages, mortgage companies, willing to cut mortgage principle for under water homeowners through the housing affordable modification program. you have talked about it some time, haven't you. the need for principle reduction is very apparent not only in new jersey but some other states obviously while the decline in the medium price, medium price of a single-family house, home, outpaced the national average by 3.7% drop, a 3.7% drop with
burgin county having 8% last year, that's big and even higher drop of 8.4% right next door. mr. secretary, the need for principle reduction for freddie and fannie held mortgages is apparent, is it contained within the president's 2012 budget and if it isn't, why isn't it? >> it doesn't need to be in the budget because we believe that fannie and freddie have the clear authority to provide principal reduction in cases where it is clearly beneficial to the taxpayer to do it and there are a range of types of mortgages where that is the case. so we as you sounds like you support, we are working closely with the gsgs with fannie and freddie with the fhfa to encourage them to take another look at the math because we think it is in the taxpayers'